Tuesday, February 14, 2012

This recent earnings release from the United States Postal Service (USPS) announced a large loss for the first quarter of its fiscal year. It could, just as accurately, have said that the Postal Service made a net operating profit of $200 million delivering the mail for this year’s first quarter.

The difference between the announced loss and the operating profit is almost entirely due to an external condition imposed by a severe congressional mandate, that requires that the post office pre-fund 75 years’ worth of future retiree health benefits within the next few years. This pre-funding requirement added $3.1 billion in red ink to the USPS’s first quarter not loss figure.

Pre-funding retiree health sounds like a very laudable goal. However, the amount that the Postal Service has been required to set aside for this purpose far exceeds that which is necessary, and is unmatched by any private corporation or agency of the federal government. It is being required to fund a 75-year liability within a ten-year framework.

[...]

The Postal Service has been required by Congress to pay $5.5 billion annually, into what the IG calls a “war chest” that now holds over $326 billion. Even if no further funding was provided, and the fund simply collected a modest rate of interest, the account would be 100 percent funded in twenty-one years. In addition, the USPS has overpaid the federal retirement system by $13 billion.

[...]

The unprecedented pre-funding requirements are the work of Congressional Republicans. [...]

Nearly 80 percent of the 3,830 post offices under consideration are in sparsely populated rural areas where poverty rates are higher than the national average, demographic data analyzed by Reuters shows.

Moreover, about one-third of the offices slated for closure fall in areas with limited or no wired broadband Internet, Reuters found.

Time was when the USPS was lauded for providing a service to everyone in the US. Many a wild-eyed free marketer (well, at least one, anyway) who argued right after taking Econ 101 that the USPS should have to compete with private delivery services came to realize that it's a Good Thing that people off the beaten path don't have to pay ten or twenty bucks to send a letter, and that those sending to them don't have to, either. One might even say that this is what The Founding Fathers (PBUT) had in mind.